NFC: Don’t hold your breath

A smartphone must contain a Near Field Communication, or NFC, chip in order to conduct NFC-based mobile payments. Only a handful of smartphones today contain such chips.

No matter what you may hear, know that Near Field Communication, or NFC, for making mobile payments is, in the U.S. today, all talk. Yes, there are active but small tests in the U.S. today. Yes, major players like Google Inc. and MasterCard and Discover are pouring money into it. But that doesn’t mean people will cotton to the idea of discarding their wallets and putting all their financial power in a smartphone. That requires a significant change in the habits of people, who are by nature habitual.

And then there’s the investment required. Smartphone manufacturers have to add NFC chips to their devices. So far, only a handful have, though that handful does include powerhouse Nokia. On the flipside of Nokia, rumor has it Apple Inc. is backing off adding an NFC chip to its iPhone 5, likely to be launched in the fall.

Then comes the merchant. Merchants have to make sizable investments in new point-of-sale hardware readers that can scan NFC chips. They would have to make that investment bet on a technology that has a tiny number of users and is dependent on smartphones with embedded chips, of which there are very few. And that bet is on consumers abandoning the way they’ve done business for decades.

Today NFC is big in the minds of the technologists at major companies that see the future. The only problem is, they think that future is three years from now. If you’re talking about something mainstream, that future, in my opinion, is no less than 10 years from now. Today’s teens will drive NFC because their lives are so driven by their smartphones.

Mobile commerce started bubbling about five years ago. Today it is entering the mainstream. Why so fast? Because e-commerce did the hard work for it. It took many years, but people became quite comfortable making purchases on the Internet. M-commerce has the luxury of having that comfort level established—the difference is instead of making a purchase on the Internet, one is making a purchase on the mobile Internet. E-commerce primed the pump for m-commerce. NFC is such a new and different technology that there is no precedent for it, which gives it a tough row to hoe.

Yes, NFC will play a big role in the future of mobile payments. Teens today will love it. Everyone else? It’s going to take a lot of convincing.